social securityhttp://www.wisebread.com/taxonomy/term/3387/all
en-US9 Surprising Ways Marriage Can Make You Richerhttp://www.wisebread.com/9-surprising-ways-marriage-can-make-you-richer
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<p>Marriage can be a wonderful thing, and not just because of the potential for lifelong companionship. Tying the knot can be a great financial decision, too.</p>
<p>When you get married, you'll be eligible for some key tax breaks, and there are a number of other advantages that will ultimately help you build wealth. Take a look at these examples of how marriage can make you richer.</p>
<h2>1. There's a larger standard tax deduction</h2>
<p>Under the 2018 tax law, every married couple filing jointly is eligible for a standard deduction of $24,000. That's nearly double from the previous law and exactly twice the standard deduction for single people. This standard deduction is more important than ever, as the new tax law does not allow for as much itemizing of deductions. (See also: <a href="http://www.wisebread.com/12-things-you-should-know-about-the-new-tax-law?ref=seealso" target="_blank">12 Things You Should Know About the New Tax Law</a>)</p>
<h2>2. You may save on taxes if filing jointly</h2>
<p>Much has been said about the so-called &quot;marriage penalty&quot; in which couples could face a higher tax rate if they file jointly. But in truth, this was not an issue for most people, and the new tax law makes it even less likely that married couples will be penalized.</p>
<p>In fact, in most cases under the 2018 tax law, there won't be much difference between your taxes if you file separately or jointly. But it could be very advantageous for couples to file jointly if one spouse makes considerably more than the other.</p>
<p>To illustrate this, let's say you earn $37,000 in taxable income. Under the 2018 tax law, you'd be in the 12 percent tax bracket and pay $4,440 in tax if filing separately. Now let's say your spouse earns $190,000 per year and pays $60,080, based on the 32 percent tax bracket, also filing separately. If you file jointly instead, you'd report a combined income of $227,000 and would be in the 24 percent tax bracket. You would pay $54,480 in tax, a savings of nearly $10,000.</p>
<h2>3. You have more buying power</h2>
<p>When you get married, you are pooling financial resources. If both of you have assets and income, then you have greater ability to make purchases. It means you may be more likely to afford a down payment on a home, and have more ability to handle the monthly mortgage. It means you may become more attractive to lenders, though it is worth noting that you will still each have separate credit scores.</p>
<h2>4. You can contribute to an IRA even if you don't work</h2>
<p>If you want to contribute to an individual retirement account (IRA), you must have earned income. But there are exceptions, most notably in the form of a spousal IRA. With a spousal IRA, each spouse can have their own IRA, as long as one of the spouses has earned income. For most people, the limit of contributions on each account is $5,500 annually, so the total contributions allowed for married couples doubles to $11,000. The only catch to a spousal IRA is that couples must file their taxes jointly. (See also: <a href="http://www.wisebread.com/4-ways-couples-are-shortchanging-their-retirement-savings?ref=seealso" target="_blank">4 Ways Couples Are Shortchanging Their Retirement Savings</a>)</p>
<h2>5. You can receive Social Security spousal benefits</h2>
<p>When you file for Social Security benefits, you can file for your own benefits or under your spouse's. Even if you did not earn any income during your life, you can receive benefits through your spouse. Usually, spousal benefits are up to half your spouse's normal Social Security benefit. You'll also be able to receive spousal benefits even after your spouse passes on.</p>
<h2>6. You may spend less on health care</h2>
<p>There is considerable evidence that being married can make you healthier. Married couples look out for one another. They keep each other on track regarding diet and exercise, and a spouse is often the first person to notice when you appear unwell.</p>
<p>The Harvard Health blog reported in 2016 that married people tend to live longer, are less likely to be depressed, and have fewer strokes and heart attacks. The report also cites studies showing that married people have better immune systems. This potentially means that your health care expenses could be less than if you remained single.</p>
<h2>7. You can get health insurance through your spouse</h2>
<p>If one spouse has access to health insurance through his or her employer, they can add a spouse to their plan. This is very helpful when one spouse is not employed or is not offered health insurance through their job. In most cases, family plans offer savings over plans for individuals.</p>
<h2>8. Auto insurance is cheaper</h2>
<p>Generally speaking, auto insurance companies will charge less to married couples than single people. That's because they tend to see marriage as something a more mature person does. Of course, it helps if both drivers have good driving records; if your spouse has a worse driving record than you, you may not see any savings.</p>
<p>An analysis from Carinsurance.com revealed that married couples can typically see savings of 10 to 15 percent in most states. It's worth noting that insurance companies will offer discounts for multiple cars, as well.</p>
<h2>9. You can inherit assets from your spouse without a will</h2>
<p>To be clear, no one is suggesting you should celebrate when your spouse passes away. But it's worth noting that when you are married, you are usually entitled to inherit their assets, even if you don't have a formal will drawn up. Note: Crafting a will is still a very good idea. (See also: <a href="http://www.wisebread.com/heres-what-happens-if-you-dont-leave-a-will?ref=seealso" target="_blank">Here's What Happens If You Don't Leave a Will</a>)</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/9-surprising-ways-marriage-can-make-you-richer">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>Personal Financeadvantagesassetsauto insurancehealth carehealth insuranceinheritancemarriageretirementsocial securityspousal irataxesMon, 19 Mar 2018 09:00:06 +0000Tim Lemke2114664 at http://www.wisebread.com8 Startling Facts That Will Make You Want to Investhttp://www.wisebread.com/8-startling-facts-that-will-make-you-want-to-invest
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<p>Sometimes you need to be startled into action when it comes to investing. It's easy to come up with excuses not to begin placing money in the markets and saving for retirement. Armed with the right information, however, most people would likely choose to invest rather than stay on the sidelines.</p>
<p>Perhaps it's time to digest these eye-opening facts and realize that waiting to invest could be a big mistake.</p>
<h2>1. The average retirement savings is measly</h2>
<p>According to a 2016 survey from the Transamerica Center for Retirement Studies, baby boomers have an average retirement savings of $147,000. Those from Generation X have an average $69,000, while millennials have $31,000 saved. Those figures have probably risen slightly in the last two years, but are still well shy of the totals necessary for a comfortable retirement.</p>
<p>Older people approaching retirement age may have held off investing in their earlier years and are now playing catch up. Younger people have more time to invest and get to where they need to be &mdash; but the longer they wait, the harder it gets. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p>
<h2>2. You may be retired longer than you worked</h2>
<p>Imagine starting work at 21 and retiring at 60. That's 39 years in the workforce. If you live to 100, that's an additional 40 years &mdash; longer than the time you spent working! People are living longer these days, so it's not uncommon to see retirees still kicking it well into their 90s and beyond. In some cases, retirements are stretching past 40 years. Are you doing all you can to allow your money to last that long? Smart investing may be the only way to accumulate enough cash to support a retirement of that length. (See also: <a href="http://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it?ref=seealso" target="_blank">5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)</a>)</p>
<h2>3. Very few people get a pension these days</h2>
<p>Defined benefit plans, in which a company guarantees workers a specific amount of money each year in their retirement, have been going away fast. Today, only 13 percent of nonunion private sector workers have access to a defined benefit plan, according to the Bureau of Labor Statistics.</p>
<p>Instead, most companies now only offer defined contribution plans, such as a 401(k). With these plans, workers must invest their own money, and companies may offer to match a certain percentage of contributions (some don't). If you're in the workforce, it's likely incumbent upon you to take charge of your own retirement savings. (See also: <a href="http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do?ref=seealso" target="_blank">If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</a>)</p>
<h2>4. Half of workers say they'll probably work during retirement</h2>
<p>Isn't the entire idea of retirement to stop working? For many people, ceasing to work entirely just isn't in the cards. The Transamerica survey revealed that about half of all workers &mdash; including baby boomers, Gen Xers, and millennials &mdash; expect to work at least part-time during retirement. Working is fine if you want to, but if you dread the idea of punching a clock in your old age, invest now.</p>
<h2>5. About 20 percent of seniors rely on Social Security for nearly everything</h2>
<p>Social Security is certainly better than nothing if you're retired, but it's not a lot of money. The maximum Social Security benefit for 2018 is $2,788 per month, or about $33,500 a year, if you retire at age 66. You could get up to $3,698 monthly if you are willing to wait until age 70 begin accepting payments.</p>
<p>You won't starve, but you're not going to be cruising the Mediterranean, either. And yet, roughly one in five Americans over 65 rely on Social Security for 90 percent or more of their income, according to a 2015 study from AARP. There are some states where this figure rises to more than one in three older residents. This is a startling figure when you consider that Social Security is currently running a deficit. Invest now, so that Social Security can be like icing on your retirement cake. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p>
<h2>6. The market rarely has bad years</h2>
<p>Everyone remembers when the market crashed about a decade ago during the financial crisis. And there have been some high-profile bad years in the past. But consider this: Since the end of World War II, the S&amp;P 500 has <a href="http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html" target="_blank">recorded a negative annual return</a> just 15 times. That's 15 bad years out of 72. The New York Yankees have won 17 World Series titles during the same period! Only once since World War II &mdash; from 2000 to 2002 &mdash; has the market had three bad years in a row, and there's only one other instance of back-to-back negative annual returns. So even if you had no idea what year it was and still chose not to invest, you'd likely be missing out on positive returns. (See also: <a href="http://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market?Ref=seealso" target="_blank">How the Risk Averse Can Get Into the Stock Market</a>)</p>
<h2>7. Almost as many people own dogs as stocks</h2>
<p>About 54 percent of Americans own stocks, according to research from Gallup. Meanwhile, the American Pet Products Association reports that 48 percent of Americans own dogs. Dogs are nice. Dogs can be enjoyable. Dogs are good to have in retirement as companions, but they won't appreciate in value or help pay the bills as you get older.</p>
<p>Invest now, and you can have a comfortable retirement, complete with as many canine friends as you want.</p>
<h2>8. If you invested $100 in Amazon 20 years ago, you'd have $50,000</h2>
<p>When Amazon went public in 1997, its shares were trading at about $18. As of this writing, the company is now trading at more than $1,300 per share. A simple $100 investment 20 years ago would be worth tens of thousands today. Of course, Amazon's stock returns aren't typical. But it goes to show how even a modest investment over time can prove to be enormously lucrative.</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-startling-facts-that-will-make-you-want-to-invest">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2">
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</div> </div><br/></br>InvestmentRetirement401(k)fun factslate retirementpensionsreturnss&p 500social securitystartling factsstocksworkingWed, 14 Mar 2018 09:01:08 +0000Tim Lemke2106620 at http://www.wisebread.comHere's What You Need to Know About 529 ABLE Accountshttp://www.wisebread.com/heres-what-you-need-to-know-about-529-able-accounts
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<p>Do you have a child with disabilities? You might benefit from investing in a 529 ABLE account. These tax-advantaged savings accounts let you save money for your child's long- or short-term care without jeopardizing their eligibility for public assistance from the government.</p>
<p>Many parents with special needs children may not even know this savings vehicle exists. After all, it wasn't until 2014 that legislation paved the way for the 529 ABLE account. If you're the parent of a child with a disability, here's everything you should know about these tax-advantaged accounts.</p>
<h2>A new opportunity</h2>
<p>Congress signed the Achieving a Better Life Experience, or ABLE, act into law in 2014. The new law gave families with special needs children the option to save post-tax dollars in a new type of account. These ABLE accounts were designed to give families a way to save extra money <em>in addition to</em> the financial benefits their disabled child was already receiving from private insurers or from government programs such as Social Security and Medicaid.</p>
<p>It's a huge positive that families can save in an ABLE plan without losing their eligibility for financial government assistance. Before the act was passed, disabled people who earned more than $700 a month or who had more than $2,000 in assets could lose their eligibility for Medicaid and Social Security assistance.</p>
<p>The ABLE Act changed that. Today, families can save up to $100,000 in a 529 ABLE account before their child will lose their extra Social Security benefits. Even if they do save more than $100,000 in an account, their child will still be eligible for financial assistance from Medicaid. The money saved in a 529 ABLE account does not count against that $2,000 asset limit.</p>
<h2>How they work</h2>
<p>A 529 ABLE account works similar to its cousins, the 529 college savings and prepaid plans. But it does come with some key differences.</p>
<p>As with a traditional 529 savings plan, the contributions that you make to an ABLE account are not tax-deductible. But the earnings on those investments will not be taxed as long as you use any money you withdraw from the account for what are known as &quot;qualified disability expenses.&quot; With 529 ABLE accounts, you can withdraw money tax-free for several types of expenses. Qualified disability expenses include money spent on health, education, housing, transportation, legal fees, employment training, and monitoring.</p>
<p>In other words, there is more flexibility with a 529 ABLE account. Where there is less flexibility, however, is in eligibility. To be eligible for a 529 ABLE account, individuals must meet specific requirements.</p>
<h2>Eligibility requirements</h2>
<p>There is only a narrow band of individuals who are eligible for 529 ABLE accounts. Individuals participating must have been diagnosed with a disability before they turned 26 and must have a disability that is expected to last at least 12 consecutive months.</p>
<p>Individuals must also already be receiving benefits through the Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) programs offered through Social Security, or obtain a certificate of disability from a doctor.</p>
<p>For the 2018 tax year, individuals can make an annual contribution up to $15,000 into an ABLE account.</p>
<p>These accounts are sponsored by individual states. If your state doesn't offer a 529 ABLE account, you can still participate. You are free to sign up for an ABLE account through any state offering one, even if you don't live in that state.</p>
<h2>Changes under the Tax Cuts and Jobs Act</h2>
<p>In more good news, two key changes that came with President Trump's Tax Cuts and Jobs Act, signed into law late last year, make 529 ABLE accounts even more attractive.</p>
<p>The new federal law allows for tax-free rollovers from traditional 529 plans to 529 ABLE accounts. This is a benefit to individuals whose disabilities are diagnosed later in life. Say you've saved money for your child in a traditional 529 plan. When your child turns 16, he or she is diagnosed with a disability. In the past, if you wanted to take your funds from the traditional 529 plan and roll them into an ABLE account, you'd have to pay taxes and a financial penalty. Today, you can rollover funds from a traditional 529 plan into an ABLE account without suffering any financial penalties or paying taxes on the money.</p>
<p>The new tax law also allows ABLE account beneficiaries who are employed and earning income through their jobs to make contributions of more than $15,000 each year up to the Federal Poverty Level, as long as they are using their own income to get past that $15,000 mark and not participating in an employer-sponsored retirement plan.</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-what-you-need-to-know-about-529-able-accounts">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>Education & TrainingFamily529 able accountschildrendisabilitieseligibilitygovernment assistancemedicaidqualified expensessocial securityspecial needsMon, 12 Mar 2018 09:30:21 +0000Dan Rafter2114571 at http://www.wisebread.comHow to Retire With Less Than $1 Million in Savingshttp://www.wisebread.com/how-to-retire-with-less-than-1-million-in-savings
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<p>The sad truth is that many Americans are vastly underprepared when it comes to retirement savings. A 2016 GoBankingRates survey revealed that 33 percent of Americans have nothing saved for retirement at all. In total, 56 percent have less than $10,000 saved.</p>
<p>How much money does it actually take to retire comfortably? It seems like one million dollars is the magic number many people think of &mdash; and today, with people continuing to live longer, some think that magic number should be closer to $2 million. But is it really necessary? Could some people could get by in retirement on less?</p>
<p>For some, a smaller retirement income could actually support a reasonable lifestyle provided inflation and health care costs don&rsquo;t get out of hand. For others, it might be a financial struggle.</p>
<p>That being said, let's explore all the different ways you could live a happy retirement even if you don&rsquo;t amass a million-dollar nest egg.</p>
<h2>Work part-time</h2>
<p>If your nest egg won&rsquo;t stretch far enough for all of your financial needs, a part-time job could help immensely. Not only can the extra income come in handy, but a few hours of work per week can have a positive effect on retirees' mental health, as well as their sense of purpose and social life.</p>
<p>You can choose to work in the same field as you always have or launch a second career, maybe in a field you've always been curious about. Turning a hobby into a business could also be profitable, provided it doesn't require a large financial investment to get off the ground. If you already have the skills and materials needed to get started, it can be a cost-effective and rewarding option to bring in extra income. (See also: <a href="http://www.wisebread.com/5-questions-retirees-should-ask-before-starting-a-small-business?ref=seealso" target="_blank">5 Questions Retirees Should Ask Before Starting a Small Business</a>)</p>
<h2>Wait to take Social Security</h2>
<p>If you can live comfortably on your savings early in your retirement, most people should hold off on taking Social Security benefits for as long as they can. The Social Security Administration reports that if you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase. If you can wait until you&rsquo;re 70 (the maximum age for waiting) you can get 132 percent of your expected payout. Unless your physical health or family history makes you think you will die before your late 70s, it usually makes sense to wait.</p>
<p>This strategy requires patience and frugality, and it may not work for retirees who need their benefits earlier to get by. Before taking this option, make sure you&rsquo;ve got the financial means to wait, and that you have no other options for bringing in an alternative source of income. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p>
<h2>Reduce your housing costs</h2>
<p>Housing is one of the largest expenses you&rsquo;ll incur in life. If you can decrease this expense, you could live on a lot less in retirement. One way of doing this is to move into a smaller home or apartment. This could help you eliminate or drastically lower your mortgage payment, as well as minimize other housing costs like utilities, maintenance, and property taxes.</p>
<p>Another option is moving in with friends or family, if they are willing and able to take you in. Sharing a home is becoming increasingly common due to the rising costs of living for not only retirees, but for everyone else. If you don't have friends or family you could bunk with, you could try to find a roommate that could help foot your housing bill. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p>
<h2>Invest in a health savings account (HSA)</h2>
<p>A health savings account is available to those who have a high deductible health care plan. You contribute pretax dollars into your HSA, and can use those same pretax dollars to cover qualified health care expenses &mdash; everything from hearing aids, to X-rays, to bandages.</p>
<p>The best part about this plan is that it can become a helpful part of your retirement savings when you turn 65. At this point, your HSA basically becomes a traditional IRA. You can withdraw the funds for anything &mdash; health care related or not &mdash; to help supplement your retirement income. Funds withdrawn for qualified medical expenses will continue to be tax-free, while nonmedical withdrawals will be taxed as ordinary income. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p>
<h2>Consider relocating to a low-cost country</h2>
<p>The number of American expats abroad is very surprising. The U.S. Department of State estimates that as many as 9 million citizens live overseas. There's a reason so many Americans are choosing to live out their golden years abroad; moving to a country with a lower cost of living means that their retirement dollars are stretching a lot further.</p>
<p>In lower cost of living countries, you will see steep savings on housing, food, and even health care. Many people can also afford inexpensive help from locals to assist in tasks like cooking, cleaning, and running errands.</p>
<p>What&rsquo;s more is that many of these countries have beachfront properties and communities that are affordable even for the non-millionaire retiree. Though you may be leaving friends and family behind, the good news is that they may be more likely to visit you if there&rsquo;s a beach involved. (See also: <a href="http://www.wisebread.com/4-affordable-retirement-spots-with-world-class-health-care?ref=seealso" target="_blank">4 Affordable Retirement Spots With World-Class Health Care</a>)</p>
<h2>Invest in cash producing assets</h2>
<p>If you don&rsquo;t have one million dollars in cash, you might be able to make up the balance with other assets like real estate, stocks, or a small business. All of these assets have the potential to add another stream of income for you in retirement.</p>
<p>Real estate can be an excellent source of cash flow if you are able to charge rents that exceed expenses for your property. If you own dividend-yielding stocks, the income from dividend payouts can also boost your bottom line. Finally, if you have an interest in a business that is profitable, you could retire on less than $1 million with a moderate amount of monthly net income. (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?Ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="http://www.wisebread.com/how-to-retire-with-less-than-1-million-in-savings">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5">
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</div> </div><br/></br>Retirementassetscost of livinghealth savings accountshousing costspart time jobsphased retirementsaving moneysocial securityFri, 09 Mar 2018 09:00:07 +0000Aja McClanahan2112923 at http://www.wisebread.comCould You Make Ends Meet If You Were Suddenly Disabled?http://www.wisebread.com/could-you-make-ends-meet-if-you-were-suddenly-disabled
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<p>Becoming disabled is not a worst-case scenario, but it's one that can wreak irreparable havoc on your finances. You may have little to no control over whether or not a disabling illness or injury will impact your life, but you <em>can </em>prepare for the what-if. If you don't, you could find yourself &mdash; and your loved ones &mdash; facing financial ruin should the what-if become reality.</p>
<p>We all need to ask ourselves: Could we make ends meet if we were suddenly disabled?</p>
<h2>Build your emergency fund ASAP</h2>
<p>Ideally, you should have at least six months' worth of salary in an emergency account, but even three months' worth can be a big help when you're facing a disability. Even if you can go back to work eventually, you'll probably be out for some time &mdash; first in the hospital, and then recovery time at home, which may be an extended period depending on the severity of your condition. If your emergency fund is currently running on empty, now is the time to focus on beefing it up. Illness or injury could happen at any time, to anyone. (See also: <a href="http://www.wisebread.com/7-easy-ways-to-build-an-emergency-fund-from-0?ref=seealso" target="_blank">7 Easy Ways to Build an Emergency Fund From $0</a>)</p>
<h2>Identify other sources of income or savings</h2>
<p>If you don't have a lot of money in your emergency fund, maybe there are other sources of income or savings that you can rely on. Do you have valuables that you can sell? Can you downsize to put cash in the bank? Will your disability allow you to get a new job based on your skills and limited mobility? Do you have stocks or bonds you can cash in? None of this is ideal, of course, but it may prevent or at least hold off mounting debt while you recover or figure out how to best move forward based on your disability.</p>
<h2>Disability insurance is a must</h2>
<p>If you're gainfully employed, I highly recommend that you get disability insurance &mdash; while you are still healthy and able-bodied &mdash; even if it's short-term. Short-term disability insurance will pay roughly half your salary while you're out of work. Short-term disability duration can range, but the maximum amount of time is generally a year.</p>
<p>If you can get long-term disability through your employer, even better; that will protect you after the short-term expires, paying around 50 to 70 percent of your normal salary until you can return to work or for the amount of time stated in your policy.</p>
<p>If you're not sure what kind of disability benefits you may need, talk it over with a financial adviser or planner. You may also be able to get coverage for the eventuality that your spouse has to quit their job to become your caregiver.</p>
<p>Disability insurance may not seem necessary when you're young (I was invincible in my 20s, too), but you could wind up in major financial trouble later in life, especially if you're starting your career with very little money in the bank. (See also: <a href="http://www.wisebread.com/4-things-you-need-to-know-about-disability-insurance?ref=seealso" target="_blank">4 Things You Need to Know About Disability Insurance</a>)</p>
<h2>Social Security Disability may be able to help</h2>
<p>If you didn't invest in a disability insurance policy before the injury, you can file a claim for Social Security Disability benefits and see if you qualify. Just don't count on it right away. This can be a very long, tedious process, and many claims are denied the first time they are filed. If you are denied, you can file an appeal. A lawyer may be able to help you expedite the process, though it will come with the added expense of legal fees.</p>
<h2>Consider your loved ones, too</h2>
<p>You don't want to burden your family with taking care of you if you can help it. Preventing them from having to make financial sacrifices on your behalf is another case for investing in disability insurance.</p>
<p>Your loved ones' lives can change drastically along with yours in the event of a disabling illness or injury. They may have to quit a job to become your caretaker, sell or modify their home, or make various other types of serious financial sacrifices. You can lessen that risk with proper planning. Quality of life is even more important when faced with a disability &mdash; for all those impacted, not just the injured individual &mdash; and it's your responsibility to take care of yourself while you're still healthy and ensure you have a plan.</p>
<p>The reality is, you can't assume that your loved ones will be able to drop everything and make financial sacrifices for you. Illness or injury can be a very stressful situation in anyone's life, and if you can lessen that stress ahead of time, you owe it to those who would be tasked with your care.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/could-you-make-ends-meet-if-you-were-suddenly-disabled">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3">
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</div> </div><br/></br>Personal FinanceHealth and BeautyLifestylecaregiversdisabilityemergency fundsillnessinjuryinsuranceloss of incomeout of worksocial securityWed, 07 Mar 2018 09:30:09 +0000Mikey Rox2111739 at http://www.wisebread.comWhat You Need to Know About Working While Collecting Social Securityhttp://www.wisebread.com/what-you-need-to-know-about-working-while-collecting-social-security
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<p>For many older workers, the opportunity to collect Social Security before you fully retire, while still bringing in a paycheck seems like a boon. You get to supplement your work income with a monthly check from Uncle Sam &mdash; who doesn't want that?</p>
<p>Unfortunately, working while collecting a Social Security benefit before you reach your full retirement age can take a pretty hefty bite out of your Social Security checks. Here's what you need to know about how working affects your benefits. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p>
<h2>Understanding the earnings test</h2>
<p>Your full retirement age is the point at which you receive your full Social Security benefits. Taking benefits before full retirement age means receiving a reduced benefit, and waiting to take benefits until after your full retirement age means getting 8 percent more per year in your benefits, until you reach age 70. Your specific full retirement age depends on what year you were born, but it will be between ages 66 and 67.</p>
<p>Before you reach your full retirement age, your earned income (meaning money you earn through working, rather than money from investments) negatively affects your Social Security benefits. The amount of impact is determined through what is known as &quot;the earnings test.&quot;</p>
<p>Specifically, the earnings test stipulates that if you are working and you start drawing your Social Security benefits before you have reached your full retirement age (FRA), you will see $1 deducted from your benefits for every $2 you earn over $17,040 (for 2018).</p>
<p>Beneficiaries who begin drawing their Social Security benefits during the same year that they will attain their full retirement age, but before actually hitting their FRA birthday, are still subject to an earnings test. But the income limit is much higher &mdash; $45,360 as of 2018 &mdash; and the benefit reduction is lower &mdash; $1 reduction for every $3 earned over the limit.</p>
<p>For instance, Frederica is 62 and earns $23,500 per year at her job. If she starts taking her Social Security benefits in 2018, her income will be $6,460 over the earnings limit ($23,500 - $17,040 = $6,460). That means she would have $3,230 total withheld from her Social Security benefits &mdash; which equals $1 for every $2 Frederica earns over the threshold, or half of $6,460.</p>
<p>Frederica's sister Serena is a little older, and will reach her full retirement age of 66 later in 2018. Serena earns $52,000 per year, making her income $6,640 above the earnings test threshold for those within a year of reaching their FRA ($52,000 - $45,360 = $6,640). If Serena were to take her Social Security benefits before reaching her full retirement age, she would have $1 withheld for every $3 she earns over the limit, meaning $2,213 (or ⅓ of $6,640) would be withheld.</p>
<p>Once Frederica and Serena reach their full retirement ages, however, they can earn as much as they like from work and it will have no effect on their Social Security benefits.</p>
<h2>The Social Security Administration doesn't prorate deductions</h2>
<p>What makes the earnings test particularly tough for beneficiaries who need their benefits in order to make ends meet is the fact that the Social Security Administration does not prorate the deductions to your benefits. If you make more than the income limit in earnings, the Social Security Administration will withhold your entire benefit until the full benefit reduction amount has been satisfied. This means that beneficiaries who are working and are required to have benefits withheld will go several months without receiving Social Security benefits at the beginning of each year.</p>
<p>In Frederica's case, let's say she's eligible for a Social Security benefit of $733 per month. If she has $3,230 withheld from her Social Security benefits, she will not receive her $733 monthly benefit for January, February, March, or April in order to make up for the amount she owes Social Security. But rather than give Frederica a partial check in May, Social Security will simply withhold her entire $733 benefit check for that month, which means she will have had $3,665 total withheld from her benefits ($733 x 5 = $3,665). She will not see the leftover $435 she is owed by the Social Security Administration until January of the following year.</p>
<p>The same will be true for Serena, should she decide to take her benefits before reaching her FRA in 2018. Let's say her benefit is $1,500 per month. She will have $2,213 withheld from her benefits because of the earnings test. That means she will not receive any Social Security benefits for two months, and Social Security will withhold $3,000 total. Serena will receive the $787 she is owed the following January.</p>
<p>The good news for Serena is that as soon as she reaches the month of her full retirement age, she can keep every single penny of her benefits, no matter how much she earns elsewhere. All Social Security beneficiaries are immune to the earnings test as soon as they have hit their full retirement age.</p>
<h2>Your withheld benefits aren't gone forever</h2>
<p>There is a small cherry on top of this sundae of bad news: The Social Security Administration does give you some credit for the months your benefit was withheld. At that point, Social Security basically treats you as if you waited to file your benefits for the number of months your benefits were withheld.</p>
<p>At age 62, Frederica is entitled to a benefit equal to 73.33 percent of the benefit she would have received at her full retirement age. Her full benefit would have been $1,000 at her FRA, which is why she receives a benefit of $733 per month as of age 62.</p>
<p>Each year before her FRA of 66, Frederica does not receive benefits for five months because of the earnings test. As of the month that Frederica reaches her FRA (i.e., the month of her 66th birthday), Social Security will treat her benefits as if she had waited 20 months (five months of withheld benefits for the four years between age 62 and 66) to file for her benefits.</p>
<p>This means that as of her FRA, she'll see her benefit amount increase by 9.06 percent, because not receiving benefits for 20 months is worth a 9.06 percent increase, according to the calculations we've made using the <a href="https://www.ssa.gov/policy/docs/ssb/v74n4/v74n4p21.html" target="_blank">Social Security Administration's website</a>. In other words, she will receive 82.39 percent (73.33 percent + 9.06 percent = 82.39 percent) of the $1,000 she would have earned if she'd waited until age 66 to start taking Social Security. Because of that, Frederica will begin receiving monthly benefits totaling $823.90 (82.39 percent of $1,000) as of her full retirement age.</p>
<p>In addition, if the time she spends working plus getting Social Security benefits turn out to be her highest earnings years, or if she did not have 35 full years of job earnings before she started taking benefits, the Social Security Administration will recalculate her monthly benefit based on these earnings from work each year.</p>
<h2>Avoiding the earnings test</h2>
<p>The best way to avoid the earnings test altogether is to wait for full retirement age to collect your Social Security benefits. (As we mentioned earlier, this age differs depending on the year you were born.) Not only will that keep you from having to figure out how to manage without your benefits when they are withheld, but it will ultimately increase the amount you receive each month from Social Security.</p>
<p>However, if you can't avoid taking benefits before reaching your full retirement age and while you're still working, it's important for you to understand what to expect and plan ahead for it.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/what-you-need-to-know-about-working-while-collecting-social-security">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10">
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</div> </div><br/></br>Retirementbenefitsearnings testfull retirement agereductionssocial securityworkingThu, 22 Feb 2018 09:30:09 +0000Emily Guy Birken2105785 at http://www.wisebread.com5 Tax Mistakes Freelancers Need to Stop Makinghttp://www.wisebread.com/5-tax-mistakes-freelancers-need-to-stop-making
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<p>No doubt about it, being a freelancer is hard. From serving clients to staying on top of your money game, there's no shortage of work to do. Sometimes, things may be overlooked or set on the back burner while you tackle pressing business matters. However, there is one major thing that just can't be ignored &mdash; taxes.</p>
<p>As your own chief financial officer you'll need to be aware of major tax missteps that could ultimately ruin your business. Ideally, you'll engage the help of an experienced small business accountant who knows the ins and outs of tax strategies for freelance business owners. However, you've got to have your ducks in a row to double and triple check their suggestions and advice, too. (See also: <a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes?ref=seealso" target="_blank">What Freelancers and Side Giggers Need to Know About Income Taxes</a>)</p>
<p>These are the top tax mistakes freelancers really need to stop making.</p>
<h2>1. Not paying self-employment tax</h2>
<p>As a freelancer, you probably have a number of clients that pay you without deducting any taxes. Because you are a contractor, you are responsible for any and all taxes on your income.</p>
<p>Self-employment tax is a term that covers two main taxes: Social Security and Medicare. As an employee of a company, your employer would cover part of this tax. However, lucky you, since you are your own employer, you get to pick up the tab on the entire tax bill.</p>
<p>On the other side of paying all these taxes, you do get some reprieve by deducting a portion of these payments from your gross income, which can reduce the amount of taxes you owe overall.</p>
<p>Just know that it's very important to pay self-employment taxes on your freelance income. If your client issues you a 1099 form, it's also transmitted to the IRS. The IRS becomes aware of this income and can demand you to make an accounting for that money if they suspect you owe taxes on it.</p>
<h2>2. Not having an accounting system</h2>
<p>Making a lot of money as a freelancer can also increase your tax liability. If you don't have a good system in place to track all of your income and expenses, you could end up paying more (or less) taxes than you're supposed to.</p>
<p>Charleen Fariselli is a CPA who has worked with small businesses for over 10 years. She says that freelancers who don't accurately track income and expenses are at a disadvantage. &quot;This affects their taxes because they don't have a good accounting system and are often losing deductions so they pay more in tax,&quot; she says.</p>
<p>Charleen also adds that a lack of a good accounting system can have an impact on making timely, accurate tax payments: &quot;These freelancers can't calculate what their taxable income is each quarter for making tax payments, so they over or underpay, if they pay at all.&quot;</p>
<p>The good news is that there are many accounting software options out there to help you organize your books, including QuickBooks, Xero, Wave, and Freshbooks. You can also use a simple Google Sheets document. (See also: <a href="http://www.wisebread.com/5-free-accounting-tools-for-freelancers?ref=seealso" target="_blank">5 Free Accounting Tools for Freelancers</a>)</p>
<h2>3. Mixing business with pleasure</h2>
<p>One of the worst things a freelancer can do is allow their business expenses and income to spill over into their personal finances. For example, a business owner may use a business credit or debit card to cover a personal expense like purchasing groceries for their family.</p>
<p>The biggest problem with this behavior is how it affects record keeping for tax filing purposes. Joshua Zimmelman of Westwood Tax &amp; Consulting says that bad record keeping can cause confusion for freelancers at tax time. &quot;Too many freelancers miss out on deductions because their finances are not organized,&quot; he says. &quot;Separating your expenses from the start makes filing your tax return so much easier.&quot;</p>
<p>If you need help keeping your personal and business finances separate, you can opt for a business checking account or credit card. You could also use both.</p>
<p>If you do have to use money from your business dealings to cover personal expenses or vice versa, make sure you keep a record of such transfers. A small business CPA can help you categorize (loan, owner draw, paycheck, etc.) the transactions so that you don't run into problems with record keeping or tax liabilities. (See also: <a href="http://www.wisebread.com/the-5-biggest-mistakes-freelancers-make?ref=seealso" target="_blank">The 5 Biggest Mistakes Freelancers Make</a>)</p>
<h2>4. Neglecting retirement savings</h2>
<p>The freelance life can be a roller-coaster ride of feast or famine, but it's still important to keep savings in the equation &mdash; especially retirement savings. Saving for retirement is not only critical for your golden years, but can also help you save on taxes.</p>
<p>When you put money away for retirement, it reduces the amount of your income tax withholding. Joanna Zarach is a consultant who helps freelancers plan for retirement. She says, &quot;Solo retirement plans are the most effective way to lower your tax bill now and to build tax-free growth in your investment accounts.&quot;</p>
<p>There are different options to save for retirement. Some smart options include:</p>
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<p>Individual 401(k): This type of account is ideal for solopreneurs who want higher contribution limits. You can save with pretax dollars while receiving tax deductions for employer contributions (you are the employer) as well.</p>
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<p>SEP IRA: Tax-deductible contributions are made by the employer (in this case, you). Growth is tax-deferred until withdrawal.</p>
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<p>ROTH IRA: With this type of retirement account, you save after-tax income that grows tax-free forever.</p>
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<h2>5. Neglecting health care contributions</h2>
<p>Paul Jacobs is a CPA, EA, and officer at Palisades Hudson Financial Group. He says he often sees freelancers, &quot;Forgetting to deduct health insurance premiums. A great tax break that is available to the self-employed is the ability to deduct this expense.&quot;</p>
<p>As a small-business owner, there are tax benefits when you pay insurance premiums for yourself and family members. Premiums for medical, dental and, in some cases, long-term health insurance qualify.</p>
<p>Reporting these premiums on your taxes can reduce your adjusted gross income (AGI) which can make you eligible for certain tax breaks. The only caveat here is that you may now have to itemize deductions in order to take advantage of this deduction come tax time due to the recent Tax Cuts and Jobs Acts of 2017.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="http://www.wisebread.com/5-tax-mistakes-freelancers-need-to-stop-making">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>EntrepreneurshipTaxesaccountingbookkeepingdeductionsfreelancehealth caremedicareretirement savingsself employmentsocial securitytax mistakesWed, 07 Feb 2018 09:00:06 +0000Aja McClanahan2095995 at http://www.wisebread.comHow to Claim Social Security Benefits While Living Abroadhttp://www.wisebread.com/how-to-claim-social-security-benefits-while-living-abroad
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<p>The benefits of being an American do not stop at the border, which is excellent news for retirees looking to live abroad. In particular, expatriates are free to collect their Social Security benefits while living abroad in an adopted country. (See also: <a href="http://www.wisebread.com/13-financial-steps-to-take-before-retiring-abroad?ref=seealso" target="_blank">13 Financial Steps to Take Before Retiring Abroad</a>)</p>
<p>While Uncle Sam will forward your Social Security benefit checks to whatever sunny beach on a foreign shore that you choose to retire to, it is important for you to understand just what you'll have to do to make sure the claiming process goes smoothly. Here's everything you need to know about claiming your Social Security benefits while living the retired life abroad.</p>
<h2>You can't take Medicare with you</h2>
<p>Let's start with the bad news: Medicare does not pay for any care you receive abroad. That's because Medicare coverage is specific to American medical providers and does not cover service outside of the United States.</p>
<p>Many retirees living abroad may still choose to enroll in Medicare so that they can return to America in case of a serious medical issue. There are severe financial penalties for enrolling in Medicare after the initial enrollment period (the three months before, the month of, and the three months after you turn 65), which means it may be worth your while to enroll in Medicare if there is any possibility you will return to the U.S.</p>
<p>That being said, it's quite possible that you will be eligible for low-cost, high-quality health care coverage in your adopted home. Many countries extend their health care services to foreign residents, and one of the potential benefits of retiring abroad is the possibility of cheaper and better health care. (See also: <a href="http://www.wisebread.com/4-affordable-retirement-spots-with-world-class-health-care?ref=seealso" target="_blank">4 Affordable Retirement Spots With World-Class Health Care</a>)</p>
<h2>But Social Security benefits are pretty portable</h2>
<p>All Social Security recipients are now required to accept their benefits electronically, which is quite a boon to retirees living abroad. This means you can either have your benefits directly deposited into a foreign bank account based in your new home, or you can have the money deposited into an American bank account that you have maintained while abroad.</p>
<p>Some countries require foreign residents to open a local bank account and have a regular direct deposit into that account. Social Security benefits offer an ideal method for fulfilling this obligation.</p>
<p>If you live in a country without such a requirement, you may choose to simply maintain your U.S. based bank, in part because many retirement destinations are all about paying in cash. Everyone from utility providers to grocers to dentists only accept cash, which makes maintaining your home bank much simpler. As long as you can withdraw funds from an ATM or banking office in your new home, there's no need to set up a new bank account or have your Social Security benefits routed elsewhere.</p>
<h2>Restrictions apply to certain countries</h2>
<p>There are two countries in the world that Uncle Sam will not send your Social Security benefits to: North Korea and Cuba. The United States Department of the Treasury has imposed sanctions on these countries which makes it impossible for American expats to receive their benefits while living there. The Social Security Administration will withhold your benefits payments while you are living in either of these two countries, but you can access your withheld money as soon as you move to a country where the U.S. will send payments.</p>
<p>You will also generally not be able to access your Social Security benefits while living in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. The Social Security Administration may be able to make exceptions for certain eligible beneficiaries who make their homes in these countries (such as appearing in person at a U.S. Embassy or U.S. Consulate every six months).</p>
<h2>Rules are different if you're not a U.S. citizen</h2>
<p>American citizens are always eligible to receive their Social Security benefits while living abroad. However, non-U.S. citizens who are eligible to receive Social Security benefits (because they paid into the system or are dependents of someone who paid into the system) have a limit to the amount of time they may receive their benefits while away from American soil. Noncitizens will receive their benefits for six months while living abroad, after which point the Social Security Administration will stop payments. Payments will be reinstated after the noncitizen has returned to the U.S. and stayed there for a full calendar month.</p>
<p>There are some exceptions to these rules, which is why the Social Security Administration has created a <a href="https://www.ssa.gov/international/payments_outsideUS.html" target="_blank">Payments Abroad Screening Tool</a> to help you figure out if you will continue to receive your Social Security benefits while living abroad.</p>
<h2>Don't forget about the tax man</h2>
<p>Just because you're living abroad doesn't mean you can forget about paying the tax man. This is especially important for retirees who are receiving Social Security benefits, since your benefits can be garnished to pay taxes you owe. American expatriates need to understand their tax requirements so they don't accidentally cause themselves a major financial problem.</p>
<p>To start, in addition to the 1040 form that every American has to fill out each year, expats living abroad may also need to complete Form 2555 to declare foreign earned income (income you receive from a job), Form 1116 to declare a foreign tax credit, and Form 8938 to declare specified foreign financial assets (such as assets you hold in foreign bank accounts, brokerage accounts, mutual funds, and unit trusts).</p>
<p>The reporting threshold to the IRS for specified foreign financial assets is $200,000 for single filers living abroad, and $400,000 for married couples. However, you are also required to report foreign assets greater than $10,000 to the Department of the Treasury, using FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Failure to file with the Department of the Treasury can result in stiff penalties of up to 50 percent of the balance of the account, and possible criminal charges.</p>
<p>You may also owe taxes to your adopted country, so be sure to understand the tax laws of your new home and file taxes accordingly. (See also: <a href="http://www.wisebread.com/9-things-to-know-before-retiring-abroad?ref=seealso" target="_blank">9 Things to Know Before Retiring Abroad</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/how-to-claim-social-security-benefits-while-living-abroad">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>RetirementTravelamericansbenefitscitizensexpatsliving abroadoverseasregulationsrulessocial securitytaxesWed, 24 Jan 2018 09:30:08 +0000Emily Guy Birken2090875 at http://www.wisebread.comYes, You Still Need an Emergency Fund in Retirementhttp://www.wisebread.com/yes-you-still-need-an-emergency-fund-in-retirement
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<p>You know how important it is to build an emergency fund while you're working. But here's what you might not know: You need to keep that emergency fund well-stocked with savings even after you retire.</p>
<p>An emergency fund might be even <em>more</em> important once you leave the working world. You won't have a regular salary to fall back on in retirement if an unexpected expense pops up. One costly car repair or medical bill can set you back and cause a lot of financial problems.</p>
<p>While you're working, you should keep anywhere from six months' to a year's worth of daily living expenses in this fund. That way, if you lose your job, you'll have money available to pay your daily living expenses while you search for a replacement. You need to do the same during your retirement.</p>
<h2>How an emergency fund changes in retirement</h2>
<p>Social Security payments often complicate the emergency fund equation in retirement. That's because you are guaranteed these payments each month. When you're working, there is always a danger that you'll lose your job and your paycheck will disappear. That won't happen with your Social Security benefits. An emergency fund won't ever have to replace this source of income.</p>
<p>By the time you reach retirement, you should also know how much other income you can rely on each month. Most of this will probably come from the retirement savings you've built up over time. You should have created a retirement budget listing how much money you'll have available each month when factoring in withdrawals from these savings and Social Security payments. (See also: <a href="http://www.wisebread.com/heres-how-you-should-budget-your-social-security-checks?Ref=seealso" target="_blank">Here's How You Should Budget Your Social Security Checks</a>)</p>
<p>What you might not be as certain about are your monthly living expenses. Retirement isn't cheap, and that's where an emergency fund comes in. This liquid savings can help you cover unexpected emergencies that could otherwise break your monthly budget.</p>
<p>The challenge, of course, is in estimating how much you should keep in that fund at any given time. There is no magic formula. And how much you'll need depends largely on your health and your housing situation.</p>
<h2>The costs of retirement</h2>
<p>The most recent Merrill Lynch <em>Finances in Retirement Survey</em> says that the average cost of retirement is $738,400.</p>
<p>A good chunk of that cost can be attributed to health care. A recent report from Fidelity found that a healthy 65-year-old couple retiring in 2017 could expect to pay $275,000 throughout their retirements in health care and medical expenses. That figure is rising, with the number 6 percent higher in 2017 than it was a year earlier. (See also: <a href="http://www.wisebread.com/heres-how-far-1-million-will-actually-go-in-retirement?ref=seealso" target="_blank">Here's How Far $1 Million Will Actually Go in Retirement</a>)</p>
<p>The challenge with health care costs is that you can't control them. You might be healthy when you hit retirement, but there's no guarantee that your health won't decline. Without an emergency fund to cover unexpected medical bills, you risk wiping out a huge chunk of your retirement savings that may be budgeted for other things.</p>
<p>Then there's housing. You might have paid off your mortgage and plan to remain in your home. That's ideal &hellip; for now. As you age, you might need assisted living, which certainly isn't inexpensive. And if you enter retirement with a monthly mortgage payment, that can be a huge expense.</p>
<p>Even if you do live in your current home without a mortgage payment, you can still expect to pay for property taxes, repairs, and maintenance. And if your home has aged along with you, chances are it may take some extra TLC (and cost) to be maintained. (See also: <a href="http://www.wisebread.com/9-unexpected-expenses-for-retirees-and-how-to-manage-them?Ref=seealso" target="_blank">9 Unexpected Expenses for Retirees &mdash; And How to Manage Them</a>)</p>
<p>This is why it's so important to maintain an emergency fund in retirement. Much like when you were working, your goal should still be to keep that fund stocked with enough to cover six months' to a year's worth of daily living expenses in case the worst should happen.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/yes-you-still-need-an-emergency-fund-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3">
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</div> </div><br/></br>Retirementemergency fundshealth carehousing costsincomemaintenancemedical billsmortgagessocial securityWed, 17 Jan 2018 09:00:06 +0000Dan Rafter2085674 at http://www.wisebread.com7 Easiest Ways to Catch Up on Retirement Savings Later in Lifehttp://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life
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<p>According to a survey by the Employee Benefit Research Institute, three in 10 workers report that preparing for retirement causes them emotional distress. Why? Well, because most people feel they are sorely behind when it comes to retirement savings.</p>
<p>The Economic Policy Institute reports that baby boomer families, on average, have just a little over $160,000 saved for retirement. With longer life spans, inflation, and increasing health care costs, it's possible that many retirees won't have enough to comfortably sustain their retirements.</p>
<p>If you feel behind with your retirement savings, you may be panicking. However, there's hope for you. If you're open to suggestions, a few smart moves will help you catch up on savings even late in the game. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p>
<h2>1. Change your mindset</h2>
<p>One of the best ways to take the pressure off catching up with retirement savings is to change your mindset.</p>
<p>Rob Hill, owner of financial advisory firm R. Hill Enterprises, Inc., helps people plan for retirement and other stages of life. He says that in order to catch up with your savings, you need to first be more flexible with your idea of retirement. &quot;The first thing I would suggest is not looking at retirement as an age, but rather a financial position,&quot; he says.</p>
<p>Hill explains that focus can ease anxiety and make a catch-up goal more feasible for some. He explains, &quot;The goal of retirement is not a pile of assets, it is cash flow that makes retirement possible.&quot;</p>
<p>If you look at retirement in this light, you may discover you have more retirement runway than you thought and that building up your nest egg is a little more possible.</p>
<h2>2. Make catch-up contributions</h2>
<p>If you're over 50 years old, you can contribute more than usual to your 401(k). For 2018, employees within the age guidelines can contribute $18,500 plus a catch-up contribution of $6,000, for a total of $24,500. This approach can be even more helpful if your employer offers a match.</p>
<p>Kevin Ward, of Park Elm Investment Advisors, notes another way to save: an IRA &mdash; either a traditional IRA or a Roth IRA. &quot;Aside from your employer-sponsored plan, you can save $5,500 in an IRA,&quot; he says. &quot;For those over 50, there is an additional catch-up contribution of $1,000, for a total of $6,500.&quot; (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p>
<h2>3. Contribute to a health savings account (HSA)</h2>
<p>Though HSAs were created as savings vehicles for health care expenses, there are some tax advantages and treatments that can make this type of account a supplemental retirement option. In order for you to open an HSA, you must have a qualified health care plan, like a high deductible health plan (HDHP).</p>
<p>Shobin Uralil, founder of HSA management platform Lively, says placing money in an HSA has many benefits and &quot;loopholes&quot; that make this a great addition for retirement savings.</p>
<p>&quot;You can save pretax money and then use pretax dollars to pay for qualified out-of-pocket medical expenses,&quot; he says. &quot;After the age of 65, you can use HSA funds for anything you want, not just qualified out-of-pocket medical expenses.&quot;</p>
<p>It's also worth noting that HSAs have no mandatory distributions in retirement so you can save into your 70s, 80s, and beyond. This is helpful for anyone behind on retirement saving and needing more time to save. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p>
<h2>4. Be frugal</h2>
<p>You might be excited about the idea of saving more money, but wondering how you'll actually achieve those higher savings rates. Your best bet is to reduce your current lifestyle expenses. Of course, you'll want to adjust your spending to a level that is comfortable for you. But keep in mind the ultimate goal of having enough money to support your retirement.</p>
<p>The options for saving money are unlimited. With some creativity and motivation, you should be able to find some frugal habits that will help you make your savings goals &mdash; everything from downsizing your home, to eating out only once per month. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?Ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p>
<h2>5. Postpone collecting Social Security</h2>
<p>This is another strategy that can help you earn more income during retirement. The Social Security Administration reports that postponing Social Security benefits past your full retirement age can boost future payments by up to 8 percent for every year the income is deferred until age 70.</p>
<p>Tom Foster, national spokesperson at MassMutual, works with financial advisers and employers to educate them about 401(k) plans. He recommends postponing Social Security benefits because the returns are pretty significant if you can hold off. He notes, &quot;Few investment strategies net such a return, never mind one with a guarantee.&quot; (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p>
<h2>6. Keep working</h2>
<p>A 2013 Georgetown University study estimates that there will be as many as 55 million job openings by 2020 due to baby boomers retiring and leaving the workforce. So the chances are, there will be plenty of demand for those who want to stick around and work longer.</p>
<p>Fortunately, we live in a wonderful time where the internet allows people to work longer, under flexible conditions from almost anywhere in the world. If you can keep working longer, it will add to your potential to save up even more money. (See also: <a href="http://www.wisebread.com/4-creative-remote-jobs-that-can-supplement-your-retirement-income?ref=seealso" target="_blank">4 Creative Remote Jobs That Can Supplement Your Retirement Income</a>)</p>
<h2>7. Keep investing</h2>
<p>It used to be that people drastically reduced their investment portfolios in anticipation of their &quot;golden years.&quot; In order to reduce the risk of losing the principal amount of their savings, a retiree might be prompted to go with a very conservative investing strategy by keeping their assets in cash, bonds, or a combination of both.</p>
<p>Nowadays, people are living and working longer and may be able to invest and save more aggressively for longer periods of time.</p>
<p>Cliff Caplan, CFP at Neponset Valley Financial Partners, suggests that people needing to save more should continue to invest for growth. &quot;Establish and continually fund a growth-oriented account that can benefit from lower long-term capital gains treatment,&quot; he says. &quot;Dollar cost averaging can also be used to reduce volatility in a portfolio.&quot; (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="http://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3">
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</div> </div><br/></br>Retirement401(k)catching upcontributionscutting expensesHSAIRAlate startersrisksaving moneysocial securitystocksTue, 16 Jan 2018 10:00:06 +0000Aja McClanahan2085769 at http://www.wisebread.comWhat to Do if You're Laid Off Before You Retirehttp://www.wisebread.com/what-to-do-if-youre-laid-off-before-you-retire
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<p>You had a plan. You were going to work for a few more years, and head gracefully and gleefully into retirement. But your company didn&rsquo;t cooperate. You&rsquo;ve found yourself laid off, and wondering what to do next.</p>
<p>The job market is tough for older people, and if you are a few years away from your intended retirement date, you may be unsure of the best next steps. Can you retire early? If not, what jobs are out there for people your age? Do you even want to work full-time anyway?</p>
<p>Everyone&rsquo;s situation is different, but there are options for older people who find themselves laid off before their planned retirement.</p>
<h2>Look for a new full-time job</h2>
<p>There&rsquo;s no question that folks over 50 may have a tough time in the job market. Ageism exists, especially in fields where employers assume young people will have more technical skills. But it&rsquo;s entirely possible to find a new position, and there are companies that will value the experience and knowledge of an older worker.</p>
<p>The American Association of Retired Persons (AARP) names several great jobs for people over 50, including accountant, personal trainer, landscaper, and interpreter. Just keep in mind that it may take weeks or even months to land a position you want. This is why it&rsquo;s important to maintain an emergency fund with at least three to six months' worth of living expenses.</p>
<h2>Find a fun part-time job</h2>
<p>Recently, my family and I went to Pittsburgh and took a tour of the ballpark. Most of the tour guides were older men who appeared excited to be there, and the team seemed to appreciate the knowledge and enthusiasm they brought to the job.</p>
<p>If you feel like you need to work to stay busy and bring in some dollars, but don&rsquo;t need to work full-time, try to find something that channels your passion. Maybe it&rsquo;s working outside doing landscaping or lawn care. Perhaps it&rsquo;s doing home improvement work, or tutoring students in English. If you can find something you enjoy and get paid for it, that may be better than landing a full-time job. (See also: <a href="http://www.wisebread.com/6-great-retirement-jobs?ref=seealso" target="_blank">6 Great Retirement Jobs</a>)</p>
<h2>Seek consulting gigs</h2>
<p>While companies aren&rsquo;t always eager to hire older workers on a full-time basis, they have been known to rely on them for expertise on a contract basis. Companies still must rely on older workers who have institutional knowledge and some specific experience. In fact, it&rsquo;s not unheard of for workers to be laid off only to return as a consultant, doing similar work. (I once met a guy who was brought back and found himself sitting at his same old desk!)</p>
<p>If you do find yourself laid off, consider marketing your services on a contract or as-needed basis. You may be surprised at how lucrative some of these opportunities are, and you will have some job flexibility that may help you phase into retirement for good.</p>
<h2>Adjust your budget</h2>
<p>The good news about being laid off when you are older is that your living expenses are generally lower. But you&rsquo;ll still need to reduce your spending if you find yourself without a job. Track all of your expenses and see where you can cut costs. Savings may come from canceling your cable TV subscription, or reducing your food budget. You may save money on gas and other car expenses if you aren&rsquo;t working. You&rsquo;d be surprised where you can find ways to cut costs, and you may even find that you will be comfortable with a lower standard of living, allowing you to retire for good. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p>
<h2>Go ahead and retire</h2>
<p>Perhaps you planned to stop working at 63, but you were laid off at 59. You may think you need to keep working to hit your retirement savings goal, but you might be much closer than you think. Maybe your savings goal was larger than necessary and you&rsquo;re actually right on target. Perhaps you only need to make modest adjustments to your standard of living, like reducing your spending for a few years, or adjusting your investment strategy to boost your income now while still growing your nest egg.</p>
<p>You may find yourself retired early, but those few years may not make much of a difference. If you have a financial adviser, talk with them about how to make your money work for you <em>now </em>and last a little longer. Your adviser may also be able to help you avoid any penalties and taxes from withdrawing money from your retirement accounts early. (See also: <a href="http://www.wisebread.com/5-ways-to-handle-a-forced-early-retirement?ref=seealso" target="_blank">5 Ways to Handle a Forced Early Retirement</a>)</p>
<h2>Check if you can collect Social Security</h2>
<p>Let&rsquo;s say you find yourself laid off at age 62. The good news is that you are old enough to begin receiving Social Security benefits, though your payments will not be as high as they would be if you waited another five years (until your full retirement age). At age 62, you&rsquo;ll receive about 70 percent of the maximum monthly benefit.</p>
<p>If you can wait until you are older to collect, you&rsquo;ll end up receiving more benefits in the long run. But even a partial benefit is better than nothing, and may allow you to retire early. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p>
<h2>Identify passive income sources</h2>
<p>If you are unable to find a new job or unsure if you want to return to the workforce, it may be time to get creative in how you make money. It&rsquo;s entirely possible to earn money without a &ldquo;real&rdquo; job, if you know where to look. Adjusting your investment portfolio to earn money from dividend stocks is a popular option among older Americans. With dividends, companies pay a portion of their income to shareholders, and returns can be much higher than interest from the bank.</p>
<p>Real estate can offer a passive income source as well. If you have the funds to buy an investment property, consider renting it out and earning money from tenants. (Just keep in mind there may be some work and expense associated with ownership.)</p>
<p>If you are computer savvy, you may be able to make money from blogging or hosting videos on YouTube. This content can earn you money from advertising long after you&rsquo;re done producing it.</p>
<p>The job market may be tougher for older citizens, but that doesn&rsquo;t mean you can&rsquo;t earn money. And who knows? Some of these sources may be able to continue to bring you income even after you retire for good. (See also: <a href="http://www.wisebread.com/5-ways-to-make-passive-income-online?ref=seealso" target="_blank">5 Ways to Make Passive Income Online</a>)</p>
<h2>Start a business</h2>
<p>Maybe you spent your work life wishing you could be your own boss, but the stars never quite aligned. Perhaps now is the time to take the plunge and become an entrepreneur. There&rsquo;s obviously some risk in starting a business, but you may be at a point in your life where you have some money saved and relatively low living expenses. You may have years of work experience that you can bring to the table to get the business launched, and you can now set your own work schedule.</p>
<p>Your business doesn&rsquo;t necessarily have to involve starting the next Amazon.com. It might be something more low key, like a math tutoring business, a small handyman company, or selling handmade items.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/what-to-do-if-youre-laid-off-before-you-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>Retirementbudgetingconsultingentrepreneurshipforced retirementlaid offloss of incomepart-time jobspassive incomeside gigssocial securityFri, 12 Jan 2018 09:30:09 +0000Tim Lemke2074049 at http://www.wisebread.comWhy Playing It Safe With Your Money Is Actually Riskyhttp://www.wisebread.com/why-playing-it-safe-with-your-money-is-actually-risky
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<p>The stock market has had a good run lately, but all good things come to an end eventually. And many of us remember a time not too long ago when a big crash wiped out billions of dollars in investment gains.</p>
<p>Fear of a downturn, however, should not be an excuse to get too conservative in your investment approach. While it may be tempting to avoid stocks and keep all your money in cash and bonds, there is a real risk that you may find yourself without enough saved for retirement.</p>
<p>While many of us may view stocks as &ldquo;risky&rdquo; investments, the more risky move is to play it too safe. Here&rsquo;s why.</p>
<h2>1. You may live a long time</h2>
<p>It was once common for someone to work into their 60s and pass away in their 70s. It wasn&rsquo;t necessary to prepare for a retirement of more than 15 years or so. But now, there are many cases of people living into their 90s and beyond. In fact, it&rsquo;s not unheard of to have a retirement that lasts longer than your work life. Are you on track to save enough to last 30 or 40 years?</p>
<p>Accumulating enough for this length of time requires the investor to expand their risk tolerance and invest largely in stocks, especially earlier in life. It&rsquo;s OK to shift to some cash and bonds later, but going too conservative will leave your nest egg short of what you need. (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p>
<h2>2. Interest rates are low</h2>
<p>You may be tempted to put money in a savings account or in certificates of deposit due to their safety. But bank interest rates and bond yields are still very low by historical standards. Consider that you&rsquo;ll be lucky to get a 1.5 percent annual yield from a savings account, while bond yields are between 1 and 3 percent. With rates this low, your money may barely grow faster than the rate of inflation if you don&rsquo;t invest in something more aggressive. It&rsquo;s fine to keep a sizable fund in cash in the event of an emergency, but keeping the bulk of your retirement fund in low-interest accounts is not the ticket to a comfortable retirement.</p>
<h2>3. There&rsquo;s no pension to help you</h2>
<p>We&rsquo;ve all heard stories of our parents and grandparents walking into retirement with a hefty pension that took care of them for however long they had left on Earth. Those days are gone. While many employers still contribute to retirement through 401(k) plans, their overall contribution is less than in the past, or at least partially dependent on you setting aside some of your own money. It&rsquo;s now up to the individual to set aside enough money for a comfortable retirement, and this may require taking some risk and investing in stocks with a potential for growth. Play it too safe, and you may find yourself short on cash later in life. (See also: <a href="http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do?ref=seealso" target="_blank">If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</a>)</p>
<h2>4. You may end up helping your kids</h2>
<p>You may envision your retirement as a time spent traveling with your spouse, lounging on beaches, and doing crossword puzzles. In truth, it may be all that, plus a hefty dose of financial and child care support for your kids. A survey from TD Ameritrade revealed that millennial parents receive an average $11,000 annually from their own parents in the form of financial assistance or free child care. While these older citizens are eager to help their kids, 47 percent of them do admit that they have to make sacrifices in their own life to offer this assistance.</p>
<p>In planning for your retirement, are you taking into account the possible expense of helping out your own kids? This assistance can add tens of thousands of dollars to your retirement costs, so it&rsquo;s important to have an investment strategy that is aggressive enough to take these costs into account. (See also: <a href="http://www.wisebread.com/are-you-ruining-your-retirement-by-spoiling-your-kids?ref=seealso" target="_blank">Are You Ruining Your Retirement by Spoiling Your Kids?</a>)</p>
<h2>5. Future benefits aren&rsquo;t guaranteed</h2>
<p>You may be banking on Social Security and other government programs to help support you when you get older. We all hope they&rsquo;ll be in place when we retire, but the stability and future of those benefits is subject to the whims of our lawmakers. Social Security and Medicare both are facing long-term budget shortfalls, and many lawmakers have advocated for adjustments to benefits in order to ensure these programs remain solvent.</p>
<p>It&rsquo;s impossible to predict what government benefits will exist for retirees decades into the future, but no one should assume they will remain as-is forever. Moreover, these benefits were never designed to support a robust, active retirement. By taking a more aggressive approach with your own saving and investing, you can accumulate enough to enjoy a good retirement regardless of what government benefits look like in the future. (See also: <a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over?ref=seealso" target="_blank">5 Sobering Facts About Social Security You Shouldn't Panic Over</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/why-playing-it-safe-with-your-money-is-actually-risky">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3">
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</div> </div><br/></br>InvestmentRetirement401(k) plansbenefitsfear of investinggrowthinflationinterestmarket downturnspensionsrisksocial securityFri, 22 Dec 2017 10:00:06 +0000Tim Lemke2073022 at http://www.wisebread.comHow to Plan for a Forced Early Retirementhttp://www.wisebread.com/how-to-plan-for-a-forced-early-retirement
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<p>Every working adult dreams of the day they can retire and take it easy. But for some, retirement is forced upon them sooner than expected. When this happens, a world of financial stress can follow.</p>
<p>LIMRA Secure Retirement Institute found that 51 percent of workers retire between ages 61 and 65, while 18 percent retire even earlier than that. It may not have been in your plans to retire so soon, but life doesn't always go accordingly &mdash; things like declining health or caregiving for a loved one can force people to leave the workforce earlier than they anticipated.</p>
<p>Retirement experts advise that in the face of this new trend, your retirement plan should include early retirement options and safeguards. Below are six things you can begin doing now to prepare for an unexpected early retirement.</p>
<h2>1. Start planning early</h2>
<p>Retiring just five years early &mdash; at age 60 versus 65 &mdash; can significantly impact the amount of income you may need to retire comfortably. One common retirement rule of thumb that can help you roughly determine how much you should save is the <em>four percent rule</em>.</p>
<p>Financial experts believe you can safely withdraw about $4,000 a year per $100,000 of savings during retirement, and that would last you approximately 33 years. So, if your living expenses are $40,000 a year, you'd need to save $1 million. This simple rule does not account for inflation or other sources of income such as Social Security benefits, but experts believe it&rsquo;s a good baseline for gauging your retirement needs. (See also: <a href="http://www.wisebread.com/4-retirement-rules-of-thumb-that-actually-work?ref=seealso" target="_blank">4 Retirement &quot;Rules of Thumb&quot; That Actually Work</a>)</p>
<p>Bumping up what you contribute to your retirement fund, even by just a few dollars a month, along with lowering your cost of living is a great way to prepare yourself and your family in case you have to retire prematurely.</p>
<h2>2. Plan for inflation</h2>
<p>While the four percent rule is a great place to start, if you know that early retirement is highly likely for you, you need to be more aggressive. Fidelity advises that your goal should be to save at least six times your current annual salary by the time you are 50, and 10 times your income by the time you are 67. If you are not near these targets, it&rsquo;s time to rearrange some things, rein in your spending, and begin aggressively saving.</p>
<p>Another pitfall of retirement many people forget to plan for is inflation. Retirement investments have failed to keep pace with our aging population, Social Security cuts, and hedge against the investment risks brought on by the shift from traditional pensions to individual savings.</p>
<p>When you retire, the world will be a more expensive place than it was while you were saving. You must understand and plan for the fact that $10 today will not buy the same thing in 2035. (See also: <a href="http://www.wisebread.com/4-ways-to-protect-your-retirement-from-inflation?ref=seealso" target="_blank">4 Ways to Protect Your Retirement From Inflation</a>)</p>
<h2>3. Don&rsquo;t take Social Security early</h2>
<p>In 2014, LIMRA found that 57 percent of men and 64 percent of women took their Social Security benefits early. But since monthly benefits rise five to eight percent annually between ages 62 and 70, the longer you can wait, the better off you'll be. For example, if your full retirement age is 66, but you begin collecting benefits early at 62, your benefit will be reduced by about 30 percent.</p>
<p>In years past, once you hit 65, you were eligible for full Social Security benefits and could retire and receive a monthly check from the government. However, that is no longer the case &mdash; especially for younger workers who must put in more years to reach their full retirement age. Experts agree that you should only take your benefits early if you absolutely need to. Proper planning can prevent this from being your only option. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p>
<h2>4. Consider a partial retirement option</h2>
<p>&quot;Partial retirement&quot; simply means keeping a job on a part-time basis as a means to help stretch your retirement savings. By remaining in the workforce for a little while longer, you can defer retirement funds &mdash; such as Social Security, pensions, and even savings &mdash; until you decide to fully retire.</p>
<p>Some places, such as government agencies, offer phased retirement plans. These plans allow you to supplement your income by working part time while still contributing to your retirement fund and allowing you to keep a portion of your benefit package. It&rsquo;s important to begin researching these things and understanding your options while you are able bodied. (See also: <a href="http://www.wisebread.com/4-reasons-you-might-have-a-phased-retirement?ref=seealso" target="_blank">4 Reasons You Might Have a &quot;Phased&quot; Retirement</a>)</p>
<h2>5. Find a side gig</h2>
<p>If your company does not offer a partial or phased retirement option, side gigs are a great way to supplement your income and help tide you over until you reach full retirement age. And while most side gigs don&rsquo;t come with benefits, you do get to set your own hours and work as you are able.</p>
<p>Now is the time to look into different side or part time jobs that fit your ability, skill set, and situation. What interests and hobbies do you have that could become profitable? Write them down and research ways you can make money doing those things. You may also want to research jobs you could do from home that are not too physically demanding.</p>
<p>Side gigs and part time jobs can also be good for your health. A 2016 Oregon State University study found that those who retire early die sooner than those who work beyond age 65. (See also: <a href="http://www.wisebread.com/9-easy-ways-retirees-can-earn-extra-income?ref=seealso" target="_blank">9 Easy Ways Retirees Can Earn Extra Income</a>)</p>
<h2>6. Stick to a budget and pay off debt early</h2>
<p>Surviving in retirement is not only dependent on how much you save, but also how much you spend. Most people have to scale back a bit during retirement due to a reduction in income. Scaling back after you retire is a tough thing to do. You have more free time to travel, indulge in hobbies, and spoil the grandkids rotten &mdash; all of which can quickly shrink your nest egg.</p>
<p>Start now by creating and sticking to a conservative budget. The extra money you save should go into your retirement fund or toward paying down debt. Scale back on expenses where you can and consider downsizing before it's time to retire for good. Establishing disciplined spending habits now will carry over and benefit you later &mdash; when it really counts.</p>
<p>A great way to reduce your overhead and free up some cash is to pay down your debt as quickly as possible and to get rid of your mortgage before you retire. The less debt you have, the more spending money you have. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/denise-hill">Denise Hill</a> of <a href="http://www.wisebread.com/how-to-plan-for-a-forced-early-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5">
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</div> </div><br/></br>Retirementbenefitsbudgetingearly retirementextra incomefinancial planningforced retirementinflationphased retirementsaving moneysocial securityMon, 11 Dec 2017 09:30:10 +0000Denise Hill2068119 at http://www.wisebread.comHow Divorce Can Impact Your Social Security Paymentshttp://www.wisebread.com/how-divorce-can-impact-your-social-security-payments
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<p>Divorce can have long-reaching financial consequences that can make it harder to ensure a stable retirement for yourself. The good news is that the Social Security Administration continues to acknowledge your relationship with your former spouse, even if you have striven to forget about it. Divorced partners may potentially collect spousal benefits based on the work records of their ex-spouses. This can be a boon for retiring divorcées &mdash; especially those who earned less than their spouses.</p>
<p>Here's what you need to know about how your benefits might be affected by a former marriage.</p>
<h2>Social Security's rules for spousal benefits for divorced couples</h2>
<p>Not every divorced beneficiary is eligible for spousal benefits based upon their ex-spouse's work record. The Social Security Administration has several rules in place that you must meet in order to be eligible.</p>
<h3>Rule 1</h3>
<p>The marriage must have lasted for at least 10 years. This is bad news for Kris Humphries (whose marriage to Kim Kardashian famously lasted only 72 days), but it does ensure that any long-term marriages will offer a modicum of financial protection to each spouse.</p>
<h3>Rule 2</h3>
<p>To collect spousal benefits based on your ex's work record, you have to remain single post-divorce. However, if you do end up remarrying and your subsequent marriage ends in death, divorce, or annulment, you might still be eligible for benefits based on your original ex-spouse's work record.</p>
<h3>Rule 3</h3>
<p>If you've remained single and your ex got remarried, the spousal benefits you collect will not affect the benefits that your ex and his or her new spouse are entitled to receive.</p>
<h3>Rule 4</h3>
<p>Even if your ex has not yet applied for benefits, you may collect spousal benefits based on his or her record. You just have to meet two requirements to collect these benefits:</p>
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<p>Your ex-spouse must qualify for his or her own retirement benefits. That means he or she must have reached at least age 62 (the earliest age to collect benefits) and be eligible for benefits based on his or her own work record.</p>
</li>
<li>
<p>You must have been divorced for at least two years before the date of your filing for spousal benefits.</p>
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<h3>Rule 5</h3>
<p>You may only collect divorced spousal benefits if you have reached age 62.</p>
<h3>Rule 6</h3>
<p>If you collect spousal benefits before reaching your full retirement age, you will receive the spousal benefit plus your own retirement benefit, minus a reduction amount. Both benefits will be reduced based on the number of months you have to go until your full retirement age.</p>
<h2>Calculating spousal benefits</h2>
<p>The spousal benefit can make a financial difference for divorcées who earned less than their exes. However, because of the way that spousal benefits are calculated, individuals who earned about the same amount as their spouses will see very little benefit &mdash; or possibly none at all. That's why it's important to understand exactly how spousal benefits are calculated.</p>
<p>It all starts with a number that Social Security, in its infinite wisdom, refers to as the Primary Insurance Amount, or PIA. The PIA is the full amount of money to which you are entitled as of your full retirement age. Your PIA is calculated using the average amount of money you earned monthly during your 35 top earning years.</p>
<p>Your spousal benefit is calculated using your PIA and your spouse's PIA, using the following formula:</p>
<p style="margin-left: 40px;">50% of Spouse's PIA - Your PIA = Your Spousal Benefit</p>
<p>For example, Charlotte and Ingram divorced several years ago. Charlotte was the breadwinner for most of their marriage, and her PIA is $1,800. Ingram's PIA is $850. Let's look at what they'd each potentially receive as spousal benefits:</p>
<p style="margin-left: 40px;">50% of Charlotte's PIA - Ingram's PIA = Ingram's Spousal Benefit</p>
<p style="margin-left: 40px;">(50% of $1,800) - $850 = $50</p>
<p>Ingram's spousal benefit will be $50.</p>
<p style="margin-left: 40px;">50% of Ingram's PIA - Charlotte's PIA = Charlotte's Spousal Benefit</p>
<p style="margin-left: 40px;">(50% of $850) - $1,800 = -$1,375</p>
<p>Charlotte's spousal benefit will be treated as $0.</p>
<p>Since Charlotte earned so much more than her husband, she will not be eligible for spousal benefits based on his work record. (This is true whether they remain married or get divorced.)</p>
<p>As for Ingram, $50 does not seem like much, but this spousal benefit will be added to his retirement benefit. This means he will have a monthly benefit of $900 (his PIA of $850 + his spousal benefit of $50), provided he waits until his full retirement age to take benefits.</p>
<h2>The importance of timing</h2>
<p>The longer you wait for Social Security benefits, the more you will receive &mdash; to the tune of nearly 8 percent per year between age 62 and age 70. This is also true for divorcées hoping to receive spousal benefits, although there is a point of diminishing returns when it comes to spousal benefits.</p>
<p>Let's look at an example:</p>
<p>Mina and Nicholas divorced after 25 years of marriage. Nicholas is eligible for a PIA of $2,400 as of his full retirement age, and Mina is eligible for a PIA of $1,000 at her full retirement age. Since Nicholas has a much higher PIA than Mina, he will not be eligible for spousal benefits. Mina's spousal benefits can be calculated as follows:</p>
<p style="margin-left: 40px;">50% of Nicholas's PIA - Mina's PIA = Mina's Spousal Benefits</p>
<p style="margin-left: 40px;">(50% of $2,400) - $1,000 = $200</p>
<p>Mina's spousal benefit will be $200.</p>
<p>However, when Mina chooses to take her benefits can affect just how much she will receive. Specifically, if she applies for her benefits before reaching her full retirement age, both her PIA and her spousal benefits will be reduced based on the number of months she has to go until her full retirement age.</p>
<p>If she applies for her benefits after reaching her full retirement age, however, her PIA will be increased by what's known as delayed retirement credits. But those delayed retirement credits can nullify the spousal benefit, however, because she will receive either the PIA plus delayed retirement credits or the PIA plus spousal benefit &mdash; whichever one is greater.</p>
<p>Let's say Mina's full retirement age is 67. Here are three of her timing options:</p>
<h3>Mina's Option 1</h3>
<p>She files for benefits at age 62, as soon as she is eligible for them. This means she'll be taking benefits 60 months before her full retirement age, which means her PIA will be reduced by 30 percent and her spousal benefit will be reduced by 32.5 percent. Mina's benefit will be calculated using the following formula:</p>
<p style="margin-left: 40px;">(PIA - reduction amount) + (Spousal Benefit - reduction amount) = Total benefit before Full Retirement Age</p>
<p style="margin-left: 40px;">(Mina's PIA - 30%) + (Mina's Spousal Benefit - 32.5%) = Mina's Benefit at 62</p>
<p style="margin-left: 40px;">($1,000 - $300) + ($200 - $65) = $835</p>
<p>Mina will receive a monthly benefit of $835 if she files at age 62.</p>
<h3>Mina's Option 2</h3>
<p>She waits to file for her benefits until she reaches her full retirement age. Mina will receive her PIA of $1,000, plus her spousal benefit of $200, for a total monthly benefit of $1,200.</p>
<h3>Mina's Option 3</h3>
<p>She waits to file for her benefits until she turns 70. Since her full retirement age is 67, waiting until age 70 will earn Mina an additional 124 percent in delayed retirement credits. Mina will receive her PIA of $1,000, plus her delayed retirement credit of $240, for a total monthly benefit of $1,240. Since her PIA plus delayed retirement credit is greater than her PIA plus spousal benefit (which would be $1,200), she will not receive her spousal benefit if she waits to file for benefits until age 70.</p>
<h2>Social Security ever after</h2>
<p>Understanding just how your Social Security benefits might be affected by your divorce is an important part of retirement planning. Make sure you know exactly what you are entitled to so you don't miss out on money that can help make your retirement more comfortable.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/how-divorce-can-impact-your-social-security-payments">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2">
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</div> </div><br/></br>Retirementcalculationsdivorcemarriagepiaretirement benefitssocial securityspousal benefitsWed, 06 Dec 2017 10:00:07 +0000Emily Guy Birken2066565 at http://www.wisebread.com5 Retirement Struggles Nobody Talks About — And How to Beat Themhttp://www.wisebread.com/5-retirement-struggles-nobody-talks-about-and-how-to-beat-them
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<p>If you have ever sat down with a financial planner, you know that one of the main questions that comes up is, &quot;How much income do you think you'll need when you retire?&quot;</p>
<p>When I was asked this question, the first answer that popped into my head was, &quot;Hardly any!&quot; In the retirement scenario in my mind, my kids were independent and my home was paid off, leaving few financial obligations. When pressed, I acknowledged that I might need some money for taking fun vacations with all that free time I'll have, and for buying gifts for my grandchildren.</p>
<p>While it's true that a lot of the big expenses of our working lives have ideally been paid off by retirement, retirees still face a lot of financial obligations. Retirement is not all learning to paint or strolling on the beach &mdash; despite what prescription drug ads may lead you to believe. A 2016 study by the U.S. General Accounting Office found that retirees on average spend 77 percent of what they spent while they were working, with spending declining decade by decade as retirees age. (See also: <a href="http://www.wisebread.com/9-unexpected-expenses-for-retirees-and-how-to-manage-them?ref=seealso" target="_blank">9 Unexpected Expenses for Retirees &mdash; And How to Manage Them</a>)</p>
<p>Let's go through some of the retirement expenses you may not have accounted for, and how to deal with them.</p>
<h2>1. Health care</h2>
<p>While other expenses shrink after retirement, medical care spending increases. In the present day, the increase is modest. The same U.S. General Accounting Office report found that retirees ages 65 to 79 spend an average $5,000 a year on health care, compared to $3,900 for workers aged 50 to 64. But predictions for future health care expenses in retirement are dire.</p>
<p>HealthView Services' 2017 Retirement Health Care Costs Data Report predicts that medical costs will rise 5.47 percent per year for the foreseeable future &mdash; meaning that today's 65-year-old may be spending $10,000 or more per year on health care by age 75, on top of Medicare coverage.</p>
<p>&quot;Health care will be one of the most significant retirement expenditures; however, the savings required to cover this expense may be modest &mdash; especially if one has been utilizing an income replacement ratio (IRR) of 75% to 85%,&quot; warns the report.</p>
<p>HealthView recommends talking to your planner not just about income replacement, but also about what you expect medical expenses to be based on your current health. Look at optimizing your retirement portfolio to address those needs. For example, some advisers recommend saving for retirement medical expenses using a health savings account &mdash; although these are only available to workers who have high-deductible health plans. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p>
<p>Managing health conditions proactively can also make a big difference in expenses over a lifetime.</p>
<p>&quot;A 50-year-old male with type II diabetes can save (an average of) $5,000 per year in pre-retirement health expenses by shifting from Poorly Managed to Well Managed care,&quot; the report says.</p>
<h2>2. Taxes</h2>
<p>You might expect your income tax to disappear or decline steeply when you retire, but remember that withdrawals from 401(k) plans and traditional individual retirement accounts are taxable, as are most pensions and some Social Security benefits. If your retirement plan involves collecting rent on properties you own, well, that's taxable too. And if you have paid off your mortgage before retiring, remember that you just lost a big tax deduction in the form of mortgage interest payments.</p>
<p>The problem of taxes during retirement is the reason many workers also invest in a Roth IRA or Roth 401(k) plan. Unlike a regular retirement account, which you fill with untaxed income, only paying taxes on withdrawals, a Roth takes income you already paid taxes on, and withdrawals are tax free. Since no one knows how tax rates when you retire will compare to tax rates today, many advisers recommend spreading investments across both kinds of accounts to hedge your bets. (See also: <a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire?ref=seealso" target="_blank">Here's How Your Taxes Will Change When You Retire</a>)</p>
<p>Another thing to consider when retired is whether you plan to make charitable donations part of your estate plan. If you were going to give away thousands of dollars to charities in your will, for example, discuss with an accountant setting up a schedule of giving while you're alive, instead, so that you could take annual tax deductions that could reduce or eliminate taxes you owe.</p>
<h2>3. Inflation</h2>
<p>In recent years, inflation has been low, but the long term average annual rate of price increases is 3.22 percent. That means that if you retire with benefits and savings designed to cover 80 percent of your current income, those same benefits will cover a smaller portion of your current spending each year, if not invested to grow at a rate faster than inflation. This is why financial planners never advise keeping your life savings in cash, stuffed in a mattress.</p>
<p>Of course in retirement you don't want to take on big risks with investments, since you can't earn more money to replace what you lose. But you also can't be too conservative or you risk having inflation shrink your savings each year. With interest rates as low as they are, you can't count on earnings from certificates of deposit to surpass inflation. For most retirees, that means you must have some money in stocks, bonds, or other investments. And you must stick to your investment plan, even if the market gets rocky. (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p>
<h2>4. End of life</h2>
<p>When you plan your retirement, you're likely thinking more about all the golf you want to play or the traveling you want to do, not so much about spending your final years in a nursing home or planning your funeral. Unfortunately, those less fun expenses must also be planned for.</p>
<p>Take a realistic look at how much assisted living and nursing homes cost. If you are still young enough to get it, look into long-term care insurance. Discuss with your family whether they expect you to move in with them if you need more care later in life, or if they would prefer you plan for nursing home care or assisted living. If long-term care needs seem imminent, meet with an attorney who specializes in making Title XIX plans; they can help you learn what assets can be shielded from being liquidated to pay for care. (See also: <a href="http://www.wisebread.com/is-long-term-care-insurance-worth-it?ref=seealso" target="_blank">Is Long Term Care Insurance Worth It?</a>)</p>
<p>Medical expenses tend to jump in the final years, costing about $7,000 to $8,000 more per year in the last two years of life, according to HealthView Services.</p>
<p>Consider prepaying funeral expenses so that it's not a cost hanging over your head as you enjoy retirement. And certainly meet with an estate planner as part of your retirement planning to make provisions for the distribution of wealth after you are gone. (See also: <a href="http://www.wisebread.com/9-end-of-life-cost-savings-your-survivors-will-thank-you-for?ref=seealso" target="_blank">9 End-of-Life Cost Savings Your Survivors Will Thank You For</a>)</p>
<h2>5. Mandatory withdrawals</h2>
<p>The moment you turn age 70 and a half, you are required to take minimum distributions from your IRA, 401(k), and other retirement accounts on a schedule set by the IRS. This doesn't sound like a problem &mdash; after all, this is what you saved all that money for. But what if you don't need to spend the required distribution this year? Unfortunately, you still have to withdraw it, and pay taxes on it, or the IRS will confiscate 50 percent of the money you were supposed to withdraw in the form of a tax penalty.</p>
<p>While you can't change the IRS's schedule for required withdrawals, and you can't roll the distribution into a different tax-deferred account, you can plan for this requirement and schedule income and spending around it. For instance, you can avoid selling real estate or other investments, or scale back work hours if you are still working, and allow the income you are getting from your retirement account to replace other income. And of course, you can always invest your distribution outside of retirement accounts, if you don't need to spend it.</p>
<p>Another way to conquer the mandatory distribution is to plan for it while saving for retirement, for example by putting some income into a Roth IRA, which doesn't have required distributions. As you approach retirement, if your IRA distributions look like they will be too large for you to use, you may also talk to a planner about converting a traditional account into a Roth.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/5-retirement-struggles-nobody-talks-about-and-how-to-beat-them">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3">
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</div> </div><br/></br>Retirementend of life costsexpenseshealth carehidden costsinflationinvestmentslong term carerequired minimum distributionssocial securitytaxesMon, 04 Dec 2017 09:00:07 +0000Carrie Kirby2065326 at http://www.wisebread.com